Economics for the jilted generation…

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Jamie

On the Charlie Rose show [last month], Buffett was asked what kind of message it would send if President Obama picked Jamie Dimon or another Wall Street banker to succeed Timothy Geithner, who has expressed a desire to leave the post after Obama’s first term.

“I think he’d be terrific,” said Buffett, chairman of Berkshire Hathaway, about Dimon. “If we did run into problems in markets, I think he’d actually be the best person you could have in the job.”

Buffett added that Dimon would have the confidence of world leaders if he were appointed to the Treasury post.

Warren Buffett is one of America’s biggest bailout beneficiaries, having profited hugely from buying into firms whose assets were subsequently bailed out. Shortly after the crisis began in 2008, Warren Buffett loaned money to, and bought options from, Goldman Sachs, seemingly with the knowledge the bailout of AIG — a counterparty to which Goldman had massive, massive exposure — would take place.

Dimon as Treasury Secretary would intend more of the same. Dimon and Buffett and others like them believe in having their cake and eating it. They seem to believe that the U.S. taxpayer should provide a liquidity lifeline to their fragile and risky too-big-to-fail businesses, but without at the same time demanding any regulatory oversight to prevent too-big-to-fail banks from acting irresponsibly.

Regulators are negotiating international capital standards for the biggest banks but Mr Dimon said setting the new requirements too high, or allowing overseas banks to calculate their asset base differently, could disadvantage US banks and was already stifling economic growth.

If you want to set it so high that no big bank ever goes bankrupt … I think that would greatly diminish growth,” he told a US Chamber of Commerce conference. Too large a disparity in capital requirements between Europe and the US would mean “you’re pretty much putting the nail in our coffin for big American banks,” he said.

What this really amounts to is a lack of skin in the game. Big banks can gamble and speculate without remorse and without risk — if they win they keep the proceeds, and if they lose the taxpayer will pick up the pieces. This destroys the market mechanism, and any hope of self-regulation. Were lessons learned from 2008? If the antics of Corzine, Kweku Adoboli and the London Whale — just three big financial blowups in the last year — are any guide, big finance is acting just as irresponsibly and self-destructively as before the crisis.

Buffett and Dimon surely have in mind more cronyism, bailouts and free lunches, but the reality of the next four years and beyond may be very different indeed.

Well wasn’t there, already, news about Jamie raising his voice at Mark? Certainly those men are not simply opposing parties but probably people who hate each other…but that is all the more reason for them to sort out their problems like civilised people through peaceful means of dispute resolution (ie…the Law)

Jamie Dimon reportedly exploded in a meeting at the IMF conference when the governor of the Bank of Canada argued in favor of tighter bank regulations.

The governor, Mark Carney, who many believe is the future head of the Financial Stability Forum, supported what bankers call “growth-killing” capital requirements.

According to the Financial Times, Carney and Dimon were at a private meeting of the Financial Stability Forum in Washington DC at the IMF conference.

Mark Carney is at least capable of understanding that some controls are necessary to limit bailouts and assuage the public. Dimon doesn’t give a fuck. He’s just into raping and pillaging the public purse whenever necessary and seems to believe that the people should shut the fuck up and be grateful.

However, don’t confuse Carney’s relative moderation with him being a good guy. Both of them would seem to believe the purpose of financial regulation is to serve the banking system.

Hmm, don’t misunderstand me, I’m not convinced either of the two is an angel… I just rather a person who is not, according to his job title, at the centre of all this mess…because quite clearly things are not operating smoothly

I mean…central banker of what, exactly? The “nation state” ? Whole books by so called learned scholars from prestigious universities have been devoted to asking if the “nation state” is in fact a fiction – seriously, I was obliged to read some such manic literature for university recently…meanwhile, other parts of the academy like The Harvard Business Review (http://blogs.hbr.org/cs/2012/11/the_economically_out_of_date_n.html) … are arguing that nation states are, if not a fiction in the pure sense of the word, then at least far less relevant to the 21st century…No doubt, State elites remain very important, but they are interested in their own lives, one could reasonably suspect, much more than any forms of allegiance to some abstract idea, with most of them presumably quite willing to to acknowledge the sentiments in Edward Morgan Forster’s famous quip that:

“If I had to choose between betraying my country and betraying my friend, I hope I should have the guts to betray my country”

The idea of a central banking authority overseeing all transactions in the name of the “nation state” concerned seems to me to be a quite antiquated idea, as such, and one which I would expect to attract the least desirable types of thinking, by virtue of the fact that such centrality generates undesirable opposition to it thanks to its over reliance of force rather than co-operation….wherein control from on high is viewed as a (potential) social panacea…

Me, I rather polycentric legal orders as described by this scholar, who by the way was just awarded a guggenheim fellowship

Ideally, I would prefer it if governments stopped interfering altogether. No more bailouts. Just stop, and see how long welfare queens like Dimon and Buffett and their hyper-fragile business models last. (My guess is that as soon as the liquidity insurance is gone, the risky practices would be gone too).

But so long as the taxpayer is on the hook (which is exactly what Dimon wants) the taxpayer must have some oversight, and unfortunately the mechanism for this is at present centralised.

PS…Why didn’t the UK employ this outlandish central banker from Belgium? Instead, they opted for a more orthodox thinker…as the Gentleman who wrote that HBR article demonstrates through this blog he just posted…

“I have never seen a bigger badass from Belgium, of this I am sure. And it doesn’t look too punk rock at first glance, no? He’s in a suit, he was head of the Belgian Central Bank. But Bertrand Lietaer comes out and says that the current set of “crises” are all a feature of the current central banking system, and that nobody – from Nobel lauriates to bank mandarins to heads of state – wants to do anything to deviate from the status quo.To repeat, these crises are not faults of the system – they are features.”

In a way Dimon is pumping up interest in Bitcoin…paradox, room of mirrors, nothing simple, everything complex, ahhhh! ;-) I think, Aziz, we can basically agree that we each like peace and dislike injustice…you’re probably just a bit more expert in covering all the details :) (but I stand by my points, still!)

Caveat: I think Liaeter is being overly optimistic about his chartalist ideas about full-employment and price stability. I think that slack in employment is desirable because it allows the economy to expand or contract to uncertainty, and I think price will always be unstable because value is subjective. But he still has very interesting ideas about the monetary system. Complementary currencies (government fiat, private fiat, commodity money, electronic currencies) is very much my line of thought.

That dude started speaking about eco systems…so here’s a cool clip from a … documentary I recently watched and highly recommend…amazing stuff..it’s about “Yellowstone” .. the first ever area created primarily to preserve the natural order of things…the BBC doc has 3 parts – autumn, winter and summer..45 min each

Yes, as I said in my short blog post (- the one with the blue car http://goldendgate.tumblr.com/page/3) … there exists “the inconceivable nature of nature”. Which of the other BBC nature docs would you recommend, Aziz!? Got a favourite?

I wouldn’t espouse that philosophy to the next, Unemployed People’s of the World, convention in Rio De Janiero, Brazil in January.

I am mainly talking about slack in industrial capacity, rather than employment, but there is some correlation. I think a free market economy necessarily involves slack in labour markets. Long-term unemployment, on the other hand is a different phenomenon and more of a form of social degeneration. Some slack in labour markets is good, long-term social degeneration is bad.

As for price stability, well prices have never really been stable. They’ve always been dictated by forces of supply and demand which are dictated by human preferences which change. Yeah, we point to various instances of “price stability” in certain commodities or products, but these have generally been single points at the eye of a whirlpool of price instability.

The “free-markets” you refer to are not very free, but instead, corporate/government regulated/controlled cartels. A much more pure form of a free-market would be defined by individuals and would have little to no unemployment, as a portion of their time would be spent taking care of their essential needs [shelter, food, etc.].

If the money is real, the only thing that will affect prices [downward] is an increase in productivity. This was seen during most of the 19th century in the U.S.

When I joined my first practice in 1980, there was an office machine called a, “Paymaster.” What it did was imprint the dollar amount on checks. This machine [probably bought in the 50’s, but looked brand new] had a metal tag welded onto its surface with the price. This is how stable prices were only 50 years ago!